Sales tax is a percentage added to the price of goods and services at the point of sale
When you buy something in a store or online, the cashier or checkout page adds a percentage to your total. That percentage is sales tax. The store collects it from you and sends it to your state or local government. The tax rate varies by location — it depends on your state, county, and sometimes even your city. A shirt that costs $20 in one state might cost $21.50 in another because of the difference in tax rates.
Sales tax is different from income tax or property tax. You pay it only when you make a purchase, not based on what you earn or own. The amount you owe depends entirely on what you buy and where you buy it.
Key Takeaways
- Sales tax is a percentage added at checkout and varies by state, county, and sometimes city — there is no single national rate.
- Most states charge between 4 and 10 percent, but some states have no sales tax at all.
- Groceries, prescription medications, and certain medical equipment are often exempt from sales tax, though rules differ by state.
- Online purchases are subject to sales tax in most states, even if the seller is out of state.
- The store collects the tax from you and sends it to the government — you do not pay it separately.
Which states have sales tax and what the rates are
Five states have no sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. Every other state charges sales tax, but the rate is not the same everywhere. State rates range from 4 percent to 7.25 percent. On top of the state rate, many counties and cities add their own local sales tax. This means the total tax you pay can be anywhere from 4 percent to over 10 percent depending on where you live.
For example, California's state rate is 7.25 percent, but Los Angeles County adds 0.5 percent, so the total in some Los Angeles neighborhoods is 9.5 percent. In Tennessee, the state rate is 9.55 percent when you include local taxes. The only way to know your exact rate is to check your state's tax authority website or ask a cashier in your area.
What items are taxed and what is exempt
Most states exempt groceries from sales tax — items like milk, bread, vegetables, and meat are usually not taxed. However, prepared foods (like deli sandwiches or hot pizza) are often taxed because they are considered ready to eat. Candy and soda are usually taxed even though they are food.
Prescription medications are exempt in all states, but over-the-counter medicines like aspirin or cold medicine are often taxed. Clothing is taxed in most states, though a few states exempt it. Medical equipment like wheelchairs or hearing aids may be exempt depending on your state. The rules are not consistent across states, so an item that is tax-free in one state might be taxed in another.
Services are handled differently than goods. A haircut is usually taxed, but a doctor's visit is not. Car repairs are taxed, but car insurance is not. The pattern is not always obvious, so if you are unsure whether something will be taxed, ask before you buy.
How sales tax is calculated at checkout
The store does the math for you. If an item costs $50 and the sales tax rate is 8 percent, the tax is $4, and your total is $54. If you buy multiple items, the store adds up the subtotal of all taxable items, then applies the tax rate to that subtotal. Items that are exempt from tax (like groceries in most states) are not included in the taxable subtotal.
When you shop online, the tax is calculated the same way. Many online retailers now collect sales tax based on where you live, even if the company is located in a different state. The tax appears on your receipt or invoice before you complete the purchase, so you know the final total before you pay.
Why online purchases are now taxed
For many years, online retailers did not collect sales tax unless they had a physical store in your state. This changed in 2018 when the U.S. Supreme Court ruled that states could require online sellers to collect sales tax. Now, most large online retailers — including Amazon, Walmart, and Target — collect and send sales tax based on your shipping address.
Small online sellers may not collect sales tax, depending on how much they sell. States set thresholds (usually around $100,000 in annual sales), and sellers below that threshold are not required to collect tax in all states. If you buy from a small seller and no tax is collected, you may owe sales tax when you file your state income tax return, though most people do not report this.
The difference between sales tax and other taxes on purchases
Sales tax is separate from excise tax, which is a tax on specific items like gasoline, alcohol, and cigarettes. Excise tax is usually included in the price you see on the pump or shelf, so you do not see it added at checkout the way you see sales tax. Some states also charge a separate tax on hotel stays or rental cars, which works the same way as sales tax — it is added at the point of sale.
Import duties and tariffs are different again. If you order something from outside the United States, customs may charge a duty when it enters the country. This is not sales tax, and the amount depends on what the item is and where it comes from.
How to find your local sales tax rate
Your state's Department of Revenue or Tax Department website lists the state rate and explains which items are exempt. Many sites also have a tool where you can enter your zip code to see the combined state and local rate for your area. You can also call your local tax assessor's office or ask a cashier at a store near you.
If you are buying something online and want to know the tax before checkout, look at the retailer's tax information page. Most major retailers show the tax rate for your location before you complete your purchase. If you are unsure whether a specific item will be taxed, the retailer's customer service team can tell you.
Frequently Asked Questions
Do I have to pay sales tax on everything I buy?
No. Most states exempt groceries, prescription medications, and some medical equipment. Prepared foods, over-the-counter medicines, and most clothing are usually taxed. The rules vary by state, so check your state's tax authority to see what is exempt where you live.
Why is the sales tax different in different cities?
States allow counties and cities to add their own local sales tax on top of the state rate. A city might add 1 percent while a neighboring county adds 0.5 percent. The total tax you pay is the state rate plus all local rates that explore to your address.
Do I pay sales tax on things I buy online?
Yes, in most cases. Large online retailers now collect sales tax based on your shipping address. Some small sellers do not collect tax, but you may still owe it when you file your state tax return, depending on your state's rules.
Can I get sales tax back if I return something?
Yes. When you return an item, the store refunds the full amount you paid, including the sales tax. You will see the refund on your receipt or credit card statement.
What is the highest sales tax rate in the United States?
Combined state and local sales tax rates vary, but some cities in Tennessee, Louisiana, and Arkansas have total rates above 10 percent. The exact highest rate changes as cities adjust their rates, so check your specific location for the current rate.